There’s one month left to provide comments to the Treasury Department and the IRS on proposed regulations recently issued for the new 1% excise tax imposed on certain remittance transfers under the One Big Beautiful Bill Act.
The proposed regulations provide rules and definitions related to the 1% remittance transfer tax imposed under new Section 4475 of the Internal Revenue Code.
The 1% excise tax is payable by the sender of any U.S. outgoing remittance transfer and is collected by the remittance transfer provider, who must report and remit the tax on Form 720, Quarterly Federal Excise Tax Return, on a quarterly basis, Big Four accounting firm KPMG said in a brief on the proposed regs. To the extent the tax isn’t collected from the sender, it’s owed by the remittance transfer provider.
The Treasury Department and the IRS last October provided limited penalty relief for remittance transfer providers who fail to deposit the correct amount of the remittance transfer tax as required during the first three quarters of 2026.
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According to KPMG, the excise tax applies to any remittance transfer for which the sender provides cash, a money order, a cashier’s check, or any similar physical instrument, but doesn’t apply to any remittance transfer for which the funds being transferred are:
- Withdrawn from an account held in or by a financial institution that’s a bank insured by the Federal Deposit Insurance Corporation, a commercial bank or trust company, a private banker, an agency or branch of a foreign bank in the United States, a credit union, a broker or dealer registered with the Securities and Exchange Commission, or a broker or dealer in securities or commodities, provided that such financial institution is subject to the requirements of subchapter II of chapter 53 of title 31 of the United States Code (which imposes records and reports requirements on U.S. regulated financial institutions), or
- Funded with a U.S.-issued debit or credit card.
Under the new law, remittance transfers are treated as financing transactions for purposes of the anti-conduit rules under Section 7701(l), which permit the Treasury secretary to establish regulations recharacterizing any multi-party financing transaction as a transaction directly among any two or more parties if the secretary determines that recharacterization is appropriate to prevent the avoidance of tax, KPMG says.
The proposed regulations, which were issued on April 10, clarify the application of the remittance transfer tax, including:
- Specifying the amount on which the remittance transfer tax is imposed;
- Determining the full scope of physical instruments that trigger the tax; and
- Providing examples illustrating the application of these proposed definitions and rules.
The proposed regulations would apply to remittance transfers made in calendar quarters beginning on or after the date the regulations are finalized, but collectors and taxpayers can rely on the proposed regulations for remittance transfers made after Dec. 31, 2025, and before the first calendar quarter beginning on or after the date the regulations are finalized, provided they follow the proposed regulations in their entirety and in a consistent manner, KPMG states.
Comments on the proposed regulations are due by June 12, 2026. Complete instructions on submitting comments can be found in the proposed regulations.
Photo credit: Natalia Bratslavsky/iStock
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